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Cameron Attacks Tax Avoidance At Davos

by Robert Lee,, London

25 January 2013

Britain's Prime Minister has taken aim at tax avoidance, using a speech at the World Economic Forum in Davos to attack the way "some companies navigate their way around legitimate tax systems" and explaining that the UK has committed hundreds of millions to cracking down on avoidance.

David Cameron argued that it was "corrosive of the public trust" when businesses weren't seen to be paying tax, and that businesses who think they can continue to dodge their "fair share" of tax "need to wake up and smell the coffee because the public who buy from them have had enough." He added that: "After years of abuse, people across the planet are rightly calling for more action, and most importantly, there is gathering political will to actually do something about it."

Responding to a question about whether the "enormous moral and public pressure to pay more tax" would discourage investment in the UK, Cameron stated that "Britain has got a great offer for business." He explained that corporation tax was coming down close to 20%, and that the "patent box" would slash this to 10% for items that are invented in the UK. In return, companies should pay their fair share.

Cameron also called for more multilateral deals on automatic information exchange, including with developing counties: "The fact is, the poorer the nation, the more they need tax revenues, but often the weaker the capacity they have to collect them. But we must not let them off the hook – it can be done." Cameron cited the example of Ethiopia, explaining that UK involvement in tax collection there has led to a seven-fold increase in tax collection over the last decade.

Along with tax, Cameron's speech also emphasized the issues of trade and of transparency within the developing world. He complained that trade is still choked off by barriers and bureaucracy, and he noted negotiations with the European Union and with Canada, Singapore, and Japan, as well as the beginning of negotiations on an EU-US trade agreement. He expressed a hope that the Ministerial Conference in Bali in December 2013 would "sweep away trade bureaucracy," observing that this could be worth around USD70bn to the global economy.

As regards transparency, Cameron explained that "we're going to push for more transparency on who owns companies, on who's buying up land and for what purpose, on how governments spend their money, on how gas, oil and mining companies operate, and on who is hiding stolen assets and how we recover and return them."

John Cridland, Director-General of the Confederation of British Industry, expressed support for Cameron's attack on tax avoidance. He said: "The majority of businesses pay the right amount of tax, and for the small minority which do not, times are getting tougher, and rightly so. The CBI does not condone highly abusive avoidance schemes which serve no commercial purpose other than the minimization of tax, even if they are legal. In some cases the tax system is lagging behind commercial reality, particularly around the taxation of the digital economy and transfer pricing. As the Prime Minister highlights, the UK needs to work together with other countries, including the G8, to change the rules where appropriate, so that they are fit for the global business age."

TAGS: compliance | tax | business | tax compliance | tax avoidance | corporation tax | United Kingdom | multinationals | transfer pricing | trade

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